Alkermes plc Reports Second Quarter 2020 Financial Results and Issues 2020 Financial Expectations

Alkermes plc Reports Second Quarter 2020 Financial Results and Issues 2020 Financial Expectations

PR Newswire

DUBLIN, July 29, 2020

-- Company Reports Second Quarter Revenues of $247.5 Million, GAAP Net Loss per Share of $0.19 and Diluted Non-GAAP Earnings per Share of $0.06 --

-- ARISTADA® Net Sales Increased 21% Year-Over-Year to $58.8 Million --

-- VIVITROL® Net Sales of $71.6 Million Reflect Impact of COVID-19-Related Treatment Disruptions --

-- Company Announces Board Declassification Proposal and Board Refreshment Process --

DUBLIN, July 29, 2020 /PRNewswire/ -- Alkermes plc (Nasdaq: ALKS) today reported financial results for the second quarter of 2020 and provided updated financial expectations for full-year 2020. The company had previously withdrawn its 2020 financial expectations due to uncertainties regarding the impact of the COVID-19 pandemic on its business.

"During the second quarter, we adapted in response to the changing conditions in a complex environment. As we enter the second half of 2020, we are focused on three strategic imperatives. The first is commercial execution, as we drive to maximize the opportunities for ARISTADA® and VIVITROL® and prepare for the potential launch of ALKS 3831. The second is aggressive development of our pipeline programs, focusing on high-value opportunities that we believe have the potential to address patient needs and drive significant value in the near- and long-term. ALKS 4230, our lead oncology candidate, is the most prominent of these opportunities. The third is efficient management of our operating structure, with a focus on rigorous expense management and careful prioritization of our investments," said Richard Pops, Chief Executive Officer of Alkermes.

"We distinguish ourselves from other biopharmaceutical companies through our efforts in serious mental illness and addiction — chronic, highly prevalent conditions that affect millions of people and represent some of the most challenging public health issues of our time. We have built our organization with purpose and invested in specialized commercial capabilities to navigate fragmented treatment systems as we help address the complex challenges that patients with these diseases face," continued Mr. Pops. "As the nation's response to COVID-19 continues, it is critical that we work to mitigate the pandemic's secondary impacts related to social isolation, economic hardship and anxiety. For many patients struggling with serious mental illness and addiction, the current environment has amplified the barriers to treatment that Alkermes has worked for many years to address. We believe it is our responsibility to help ensure that the treatment system continues to function for these patients." 

Quarter Ended June 30, 2020 Financial Highlights

Quarter Ended June 30, 2020 Financial Results

Revenues

Costs and Expenses

Balance Sheet

"Our second quarter results reflect solid execution across the business. The performance of the ARISTADA product family, together with disciplined management of expenses, partially offset the negative impact on VIVITROL net sales that resulted from COVID-19-related decreases in patient visits to healthcare providers and treatment centers. With increased visibility into the expected impact of COVID-19 on our commercial portfolio, today we are issuing financial expectations for 2020 that reflect current trends and underscore our commitment to driving non-GAAP profitability," commented James Frates, Chief Financial Officer of Alkermes. "Over the past five years, we have grown our topline while investing in the future growth drivers of our business. Directly as a result of those investments, we established VIVITROL as an important therapeutic option for patients with opioid and alcohol dependence; we secured FDA approvals for the ARISTADA product family; we developed ALKS 3831 and submitted a New Drug Application for schizophrenia and bipolar I disorder; we built commercial psychiatry capabilities that support the growth of ARISTADA and which are also fully leverageable for ALKS 3831; we successfully developed VUMERITY® and entered into a commercial collaboration that will provide 100% gross margin royalty revenues from net sales; we advanced development of ALKS 4230 while retaining optionality for strategic collaboration; and, we acquired a platform of histone deacetylase (HDAC) inhibitors that we believe will provide compelling pipeline opportunities in neurodegeneration and oncology. We are focused on executing our business strategy and believe these investments have positioned the business to drive long-term profitability and value creation."

Financial Expectations for 2020

The following financial expectations for 2020 reflect the anticipated net impacts of the COVID-19 pandemic on Alkermes' operating and financial results.  Alkermes anticipates that the negative impact of COVID-19 on VIVITROL net sales will be partially offset by a decrease in operating expenses, notably within R&D.  The ranges provided are based on current trends and assume that treatment provider practices and patient flow will continue to normalize. Additional wide-spread COVID-19-related restrictions or resurgence of COVID-19 could negatively impact the company's ability to meet these expectations. All line items are according to GAAP, except as otherwise noted.

In millions (except per share amounts)


Current 2020 Expectation

(Provided 7/29/20)

Pre-COVID-19 Expectation
(Provided 2/13/20; Suspended 4/29/20)





Total Revenue


$965 – $1,005

$1,030 – $1,080

VIVITROL Net Sales


$270 – $300

$340 – $355

ARISTADA Net Sales


$220 – $235

$220 – $235

Cost of Goods Sold


$180 – $190

$185 – $195

R&D Expenses


$370 – $395

$405 – $430

SG&A Expenses


$525 – $550

$535 – $560

Amortization of Intangible Assets


~$40

~$40

Other Income, Net


$10 – $15

Income Tax Expense


$10 – $15

$0 – $10

GAAP Net Loss


($145) – ($175)

($130) – ($160)

GAAP Net Loss per Share


($0.91) – ($1.10)

($0.82) – ($1.01)

Non-GAAP Net Income


$0 – $30

$40 – $70

Non-GAAP Basic EPS


$0.00 – $0.19

$0.25 – $0.44

Non-GAAP Diluted EPS


$0.00 – $0.19

$0.25 – $0.43

Capital Expenditures


~$35

$45 – $55

Governance Update

"Over the past 12 months, we conducted extensive shareholder outreach and engaged with shareholders representing approximately 60% in value of our outstanding ordinary shares. The Board values the views of our shareholders and, after considering their feedback, is taking actions to further strengthen our business and corporate governance practices. The Board believes these actions will help to position the company for long-term growth as we execute on our strategy," said David Anstice, Lead Independent Director of the Alkermes Board of Directors (the Board).

The company announced today that it plans to take a series of actions as part of its commitment to corporate governance best practices and regular Board refreshment.

Recent Events

Conference Call

Alkermes will host a conference call and webcast presentation with accompanying slides at 8:00 a.m. ET (1:00 p.m. BST) on Wednesday, July 29, 2020, to discuss these financial results, financial expectations, and provide an update on the company. The webcast may be accessed on the Investors section of Alkermes' website at www.alkermes.com. The conference call may be accessed by dialing +1 877 407 2988 for U.S. callers and +1 201 389 0923 for international callers. In addition, a replay of the conference call will be available from 11:00 a.m. ET (4:00 p.m. BST) on Wednesday, July 29, 2020, through Wednesday, Aug. 5, 2020, and may be accessed by visiting Alkermes' website or by dialing +1 877 660 6853 for U.S. callers and +1 201 612 7415 for international callers. The replay conference ID is 13707215.

About Alkermes plc

Alkermes plc is a fully integrated, global biopharmaceutical company developing innovative medicines in the fields of neuroscience and oncology. The company has a portfolio of proprietary commercial products focused on addiction and schizophrenia, and a pipeline of product candidates in development for schizophrenia, bipolar I disorder, neurodegenerative disorders and cancer. Headquartered in Dublin, Ireland, Alkermes plc has an R&D center in Waltham, Massachusetts; a research and manufacturing facility in Athlone, Ireland; and a manufacturing facility in Wilmington, Ohio. For more information, please visit Alkermes' website at www.alkermes.com.

Non-GAAP Financial Measures

This press release includes information about certain financial measures that are not prepared in accordance with GAAP, including non-GAAP net income (loss) and non-GAAP basic and diluted earnings (loss) per share. These non-GAAP measures are not based on any standardized methodology prescribed by GAAP and are not necessarily comparable to similar measures presented by other companies.

Non-GAAP net income (loss) adjusts for one-time and non-cash charges by excluding from GAAP results: share-based compensation expense; amortization; depreciation; non-cash net interest expense; changes in the fair value of the contingent consideration; certain other one-time or non-cash items; and the income tax effect of these reconciling items.

The company's management and the Board utilize these non-GAAP financial measures to evaluate the company's performance. The company provides these non-GAAP measures of the company's performance to investors because management believes that these non-GAAP financial measures, when viewed with the company's results under GAAP and the accompanying reconciliations, are useful in identifying underlying trends in ongoing operations. However, non-GAAP net income (loss) and non-GAAP basic and diluted earnings (loss) per share are not measures of financial performance under GAAP and, accordingly, should not be considered as alternatives to GAAP measures as indicators of operating performance. Further, non-GAAP net income (loss) and non-GAAP basic and diluted earnings (loss) per share should not be considered measures of the company's liquidity.

A reconciliation of GAAP to non-GAAP financial measures has been provided in the tables included in this press release.

Note Regarding Forward-Looking Statements

Certain statements set forth in this press release constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, as amended, including, but not limited to, statements concerning: the company's expectations concerning future financial and operating performance, business plans or prospects, including the anticipated ongoing impacts of COVID-19 on the company's business and financial performance, the company's assumptions with respect to normalization of patient and healthcare provider practices, the expected growth drivers of the company's business, and the company's ability to drive significant value creation and long-term growth and profitability; the potential therapeutic and commercial value of the company's marketed and development products and the company's potential contributions to supporting patient access to such products; the company's plans for, and expectations relating to, corporate governance changes, including the proposed declassification and refreshment of the Board; expectations concerning future development activities for the company's development candidates; and expectations and timelines concerning the company's commercial activities and capabilities, including in relation to the potential launch of ALKS 3831 following U.S. Food and Drug Administration's ("FDA") review and potential approval of the new drug application ("NDA") for ALKS 3831. The company cautions that forward-looking statements are inherently uncertain. The forward-looking statements are neither promises nor guarantees and they are necessarily subject to a high degree of uncertainty and risk. Actual performance and results may differ materially from those expressed or implied in the forward-looking statements due to various risks and uncertainties. These risks and uncertainties include, among others: the impacts of the ongoing COVID-19 pandemic and continued efforts to mitigate its spread on the company's business, results of operations or financial condition, including: impacts on the vendors or distribution channels in its supply chain, and the company's ability to continue to manufacture its products; impacts on its ability to continue its discovery activities; impacts on the conduct of its clinical trials, including with respect to enrollment rates, availability of investigators and clinical trial sites and monitoring of data; impacts on healthcare systems that serve people living with opioid dependence, alcohol dependence and schizophrenia and on patient and healthcare provider access to the company's medicines; impacts on the regulatory agencies with which the company interacts in the development, review, approval and commercialization of its medicines; impacts on reimbursement for the company's products, including its Medicaid rebate liability, and for services related to the use of its products; and impacts on the U.S., Irish and/or global economies more broadly; the unfavorable outcome of litigation, including so-called "Paragraph IV" litigation and other patent litigation, related to any of the company's products or products using the company's proprietary technologies, which may lead to competition from generic drug manufacturers; clinical development activities may not be completed on time or at all; the results of the company's clinical development activities may not be positive, or predictive of real-world results or of results in subsequent clinical trials; regulatory submissions may not occur or be submitted in a timely manner; the FDA or regulatory authorities outside the U.S. may make adverse decisions regarding the company's products, including decisions not to approve the company's NDAs; data from clinical trials may be interpreted by the FDA in different ways than the company interprets it; the FDA may not agree with the company's regulatory approval strategies or components of its regulatory filings, including the company's clinical trial designs, conduct and methodologies, manufacturing processes and facilities, and the adequacy of the data and other information included in its filings to meet the FDA's requirements for approval; the company and its licensees may not be able to continue to successfully commercialize their products; there may be a reduction in payment rate or reimbursement for the company's products or an increase in the company's financial obligations to governmental payers; the company's products may prove difficult to manufacture, be precluded from commercialization by the proprietary rights of third parties, or have unintended side effects, adverse reactions or incidents of misuse; and those risks and uncertainties described under the heading "Risk Factors" in the company's most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q and in subsequent filings made by the company with the U.S. Securities and Exchange Commission ("SEC"), which are available on the SEC's website at www.sec.gov. Existing and prospective investors are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. Except as required by law, the company disclaims any intention or responsibility for updating or revising any forward-looking statements contained in this press release.

Trademarks

VIVITROL® is a registered trademark of Alkermes, Inc.; ARISTADA® and ARISTADA INITIO® are registered trademarks of Alkermes Pharma Ireland Limited; VUMERITY® is a registered trademark of Biogen Inc., used by Alkermes under license; and RISPERDAL CONSTA®, INVEGA SUSTENNA®, XEPLION®, INVEGA TRINZA® and TREVICTA® are registered trademarks of Johnson & Johnson.

(tables follow)

i The term "ARISTADA" as used in this press release refers to ARISTADA and ARISTADA INITIO, unless the context indicates otherwise.

Alkermes plc and Subsidiaries

Selected Financial Information (Unaudited)






Condensed Consolidated Statements of Operations - GAAP


Three Months Ended 


Three Months Ended 

(In thousands, except per share data)


June 30, 2020


June 30, 2019

Revenues:





Product sales, net


$                    130,415


$                    136,635

Manufacturing and royalty revenues


116,505


127,897

Research and development revenue


609


14,340

License revenue



1,000

Total Revenues


247,529


279,872

Expenses:





Cost of goods manufactured and sold


45,053


46,223

Research and development


94,222


104,435

Selling, general and administrative


132,025


155,075

Amortization of acquired intangible assets


9,890


10,062

Total Expenses


281,190


315,795

Operating Loss


(33,661)


(35,923)

Other Income (Expense), net:





Interest income


1,788


3,706

Interest expense


(2,122)


(3,520)

Change in the fair value of contingent consideration


5,900


(6,500)

Other income, net


2,337


1,851

Total Other Income (Expense), net


7,903


(4,463)

Loss Before Income Taxes


(25,758)


(40,386)

Income Tax Provision


3,673


1,604

Net Loss — GAAP


$                    (29,431)


$                    (41,990)






(Loss) Earnings Per Share:





GAAP loss per share — basic and diluted


$                        (0.19)


$                        (0.27)

Non-GAAP earnings per share — basic and diluted


$                          0.06


$                          0.09






Weighted Average Number of Ordinary Shares Outstanding:





Basic and diluted — GAAP


158,895


156,991

Basic — Non-GAAP


158,895


156,991

Diluted — Non-GAAP


159,275


158,987






An itemized reconciliation between net loss on a GAAP basis and non-GAAP net income is as follows:

Net Loss — GAAP


$                    (29,431)


$                    (41,990)

Adjustments:





Share-based compensation expense


22,846


28,245

Depreciation expense


10,447


9,852

Amortization expense


9,890


10,062

Income tax effect related to reconciling items


877


2,043

Non-cash net interest expense


167


168

Change in the fair value of contingent consideration


(5,900)


6,500

Change in the fair value of warrants and equity method investments



(1,134)

Non-GAAP Net Income


$                        8,896


$                      13,746











Condensed Consolidated Statements of Operations - GAAP


Six Months Ended 


Six Months Ended 

(In thousands, except per share data)


June 30, 2020


June 30, 2019

Revenues:





Product sales, net


$                    260,141


$                    236,116

Manufacturing and royalty revenues


232,756


236,812

Research and development revenue


852


29,046

License Revenue



1,000

Total Revenues


493,749


502,974

Expenses:





Cost of goods manufactured and sold


92,264


91,584

Research and development


187,501


207,005

Selling, general and administrative


265,397


296,295

Amortization of acquired intangible assets


19,618


20,014

Total Expenses


564,780


614,898

Operating Loss


(71,031)


(111,924)

Other Income (Expense), net:





  Interest income


4,548


7,276

  Interest expense


(4,979)


(7,020)

  Change in the fair value of contingent consideration


12,700


(29,100)

  Other income, net


1,679


130

Total Other Income (Expense), net


13,948


(28,714)

Loss Before Income Taxes


(57,083)


(140,638)

Provision (Benefit) for Income Taxes


11,002


(2,250)

Net Loss — GAAP


$                     (68,085)


$                  (138,388)






(Loss) Earnings Per Share:





GAAP loss per share — basic and diluted


$                         (0.43)


$                        (0.88)

Non-GAAP earnings (loss) per share — basic and diluted


$                          0.07


$                        (0.08)






Weighted Average Number of Ordinary Shares Outstanding:





Basic and diluted — GAAP


158,495


156,665

Basic — Non-GAAP


158,495


156,665

Diluted — Non-GAAP


159,151


156,665






An itemized reconciliation between net loss on a GAAP basis and non-GAAP net income (loss) is as follows:

Net Loss — GAAP


$                    (68,085)


$                  (138,388)

Adjustments:





Share-based compensation expense


42,659


52,861

Depreciation expense


21,328


19,542

Amortization expense


19,618


20,014

Income tax effect related to reconciling items


6,797


5,015

Non-cash net interest expense


334


337

Change in the fair value of contingent consideration


(12,700)


29,100

Acquisition of IPR&D


674


Change in the fair value of warrants and equity method investments



(701)

Non-GAAP Net Income (Loss)


$                      10,625


$                    (12,220)











Condensed Consolidated Balance Sheets


June 30, 


December 31, 

(In thousands)


2020


2019

Cash, cash equivalents and total investments


$                    539,596


$                    614,370

Receivables


237,393


257,086

Contract assets


9,240


8,386

Inventory


116,458


101,803

Prepaid expenses and other current assets


51,705


59,716

Property, plant and equipment, net


361,807


362,168

Intangible assets, net and goodwill


223,898


243,516

Other assets


262,240


158,358

Total Assets


$                 1,802,337


$                 1,805,403

Long-term debt — current portion


$                        2,843


$                        2,843

Other current liabilities


318,571


388,269

Long-term debt   


273,207


274,295

Contract liabilities — long-term 


18,881


22,068

Other long-term liabilities


126,989


32,486

Total shareholders' equity


1,061,846


1,085,442

Total Liabilities and Shareholders' Equity


$                 1,802,337


$                 1,805,403






Ordinary shares outstanding (in thousands)


159,028


157,779


This selected financial information should be read in conjunction with the consolidated financial statements and notes thereto included in Alkermes plc's Quarterly Report on Form 10-Q for the three and six months ended June 30, 2020, which the company intends to file in July 2020.

 

2020 Guidance — GAAP to Non-GAAP Adjustments








An itemized reconciliation between projected loss per share on a GAAP basis and projected earnings per share on a non-GAAP basis is as follows:








(In millions, except per share data)


Amount


Shares


(Loss)
Earnings
Per Share

Projected Net Loss — GAAP


$                      (160.0)


159


$       (1.01)

   Adjustments:







Share-based compensation expense


97.5





Depreciation expense


44.0





Amortization expense


40.0





Income tax effect related to reconciling items 


5.0





Non-cash net interest expense


1.0





Change in the fair value of contingent consideration


(12.5)





Projected Net Income — Non-GAAP


$                          15.0


161


$        0.09


Projected GAAP and non-GAAP measures reflect mid-points within ranges of estimated guidance.

Alkermes Contacts:
For Investors: Sandy Coombs      +1 781 609 6377
For Media:      Katie Joyce            +1 781 249 8927

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